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Over the past two decades, endowments have become an increasingly important component of the typical university's resource base. We examine how U.S. doctoral institutions' endowment payout policies and spending decisions are affected by financial market shocks to endowments. While most endowments have formal payout policies intended to smooth payouts over time, we find that universities are more likely to deviate from these policies following negative (but not positive) shocks. These negative shocks have important economic effects on university activities. Specifically, we find that universities with larger negative endowment shocks are relatively more likely to: (1) reduce support staff (e.g., secretaries) and maintenance, but not administrators; (2) among less selective institutions, reduce expenditures on tenure-system faculty while increasing the average salary of adjuncts/lecturers; (3) make larger cuts to tenure-system faculty and secretarial support when their endowment portfolio is less liquid (i.e. higher allocations to alternative assets such as hedge funds); and (4) among more selective universities, reduce financial aid for students the following Fall and enroll fewer freshmen. We also find that universities increase hiring when there are negative endowment shocks to their peers. Thus, financial shocks have real effects on university operations, but with cross-sectional variation in how universities respond.
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We examine which firms are targets of cyberattacks and how they are affected. We find that cyberattacks cause firms to reassess the risks that they are exposed to and their consequences, so that they have real effects on firm policies even when targets are not financially constrained. Cyberattacks are more likely to occur at more visible firms, firms with more intangible assets, and firms with less board attention to risk management. Attacks where personal financial information is appropriated are associated with a negative stock-market reaction, a decrease in sales growth for large firms and retail firms, an increase in leverage, a deterioration in financial health, and a decrease in investment in the short run. Firms further respond to cyberattacks by reducing CEO bonuses and risk-taking incentives and by strengthening their risk management.
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